Update: When I boot into UEFI, the touchpad works flawlessly there. Googling reveals a lot of posts about Legion 5 touchpad not working, which is not relevant since it sort of works in my case. The device is reported as MSFT0001:00 06CB:CE2D Touchpad. I have fiddled with some of mtrack settings with no apparent effect.

I have tried mtrack and synaptics drivers in addition to normal libinput, they make matters worse: mtrack is more jumpy and synaptics will not even respond to some touches (I understand it's no longer supported). The direction of movement seems correct, as well as distance. To unlock the Windows 10 Lenovo Yoga touchpad, you need to find the function key. It's very hard and painful to position cursor when it jumps that way. The touchpad also don't feel responsive at all. But on the new laptop, the cursor will skip hundreds of pixels each time. On my old Lenovo laptop, when I move my finger against the touchpad, the cursor will move smoothly, a few pixels each time. I have recently bought a new Lenovo Ideapad Gaming laptop.

Lenovo laptop cursor jumping around